Remarks by Secretary Gates to the Marine Memorial Association, San Francisco, California

It's a pleasure to be with you in San Francisco, but then I have to confess, it's a pleasure to be anywhere but Washington, D.C. -- (laughter) -- a place where so many people are lost in thought because it's such unfamiliar territory. (Laughter and applause.) Where people say, "I'll double cross that bridge when I get to it." (Laughter.) The only place in the world you can see a prominent person walking down Lover's Lane holding his own hand. (Laughter.)

I'm really honored to have been introduced by Secretary Perry, an extraordinary public servant and visionary thinker on defense and foreign policy issues. As Bill indicated, four years ago, in the spring, summer and fall of 2006, we served together on the Baker-Hamilton Commission, just a couple of Ph.D.s with a little government experience under our belts.

Little did I know that my sojourn to Iraq with that group in September of 2006 would be only the first of many such visits for me. An anecdote about missed opportunities. While in Baghdad with the study group, about 2:00 a.m. one night, the electric power went out -- a common occurrence. And, of course, the air conditioning went off as well. It was about 105 degrees.

As the temperature rose in my room, I went outside to find somebody to fix the problem in a T-shirt and shorts. I stopped a young soldier walking by to ask his help. And all I can say is that his indifference to my discomfort -- (laughter) -- and he walked on. (Laughter.)

Now, just think, had he known that 90 days later I would be named secretary of Defense -- (laughter) -- he might have earned a battlefield promotion. (Laughter.) But it was not to be, and he remains only a vivid, nameless memory. (Laughter.)

I feel truly privileged to have been invited to deliver a lecture named in honor of George Shultz, a man who I believe will be remembered in history as one of our information's finest Secretaries of State. For more than six years, he and Ronald Reagan formed one of the most successful partnerships of a president and his chief diplomat in modern times, a true model for how the relationship is supposed to work.

And having just left the swampy humidity of Washington, all I can tell you is that both Bill and George made a really smart choice by relocating to the Bay Area. (Laughter.)
I would also like to thank this lecture's sponsors, the World Affairs Council of Northern California and the Marines Memorial Association. I appreciate the hard work that the Memorial Association's president, Major General Mike Myatt, put in this event and is putting in to preparing for San Francisco's Fleet Week in October as its chairman.

And it is fitting that George Shultz himself, a proud Marine, be associated with this lecture and with Fleet Week as honorary co-chair. And I might just note that even as Marines today are helping with flood relief in Pakistan, Fleet Week here will provide demonstrations of the Naval service's humanitarian assistance and disaster relief capabilities.

It's appropriate that I address this audience during an important point in the history of the United States Marine Corps and at a time of great challenge and change for America's military. It has been nearly nine years since about a thousand Marines of Task Force 8158 landed in the Afghan desert from ships more than 400 miles away in the Northern Arabian Sea establishing America's first conventional foothold in the country.

The commander of that effort, which took place just weeks after 9/11, was then Brigadier General James Mattis. Yesterday, I was privileged to see General Mattis take charge of Central Command, overseeing all U.S. military operations in the Middle East and Central Asia, including Afghanistan and Iraq.

The attacks of 9/11 began nearly a decade of constant deployment and combat for our military and especially our nation's ground forces. In Iraq, Marines, as is often the case, were handed some of the roughest real estate and saw some of the most brutal and deadliest fighting of the conflict. Places like Fallujah and names like Zembiec and Dunham will take their place in Marine Corps history along with the legends of the past.

The Marine presence in Iraq came to an end earlier this year with the handover of responsibility for Anbar Province to the Army. Marines left behind a stable region that, in only a few years earlier, was at the epicenter of the Sunni insurgency. In fact, by Marine standards, they were probably too successful as the lack of violence in Anbar Province over the last couple of years, combined with access to the amenities of big bases, made the Commandant worry that his Marines were going soft. And I heard fairly often directly that they were just plain bored.

Well, there will be no such worries in Afghanistan, for nearly 20,000 Marines are in the thick of the fight. There, they have been sent into the Taliban's strongholds in the southern part of the country. These warriors are writing a new chapter in the Marine Corps role of honor with their blood and their sweat.

All told, the Iraq and Afghan campaigns have posed extraordinarily complex challenges to America's fighting men and women, forcing them to assume the role of diplomat, warrior, humanitarian, the development expert. They've shown what the late Marine General Victor Krulak once wrote was the adaptability, initiative and improvisation that are the true fabric of an obedience, the ultimate and soldierly conduct going further than sheer heroism.

In many ways, Marines are uniquely pedigreed for these tasks, having long recognized the need to be flexible and prepared to fight and operate in any contingency including counterinsurgency and stability operations. Indeed, the Marines led the way in our young republic's first war on terror against the Barbary Pirates at the dawn of the 19th century and wrote the first counterinsurgency and stability handbook called "The Small Wars Manual" some 70 years ago.

Yet the post-9/11 years and wars have also triggered anxiety in some circles over the future role and character of the Marine Corps, an anxiety that is rooted in the fact that the Marines in Iraq and Afghanistan have functioned for years as a so-called second land army.

The perception being that they have become too heavy, too removed from their expeditionary amphibious roots and the unique skill sets those missions require. General James Conway, the Commandant, has noted that we have a generation of officers and Marines that are combat hardened but may never have stepped aboard a ship. Defining the future mission of the Marine Corps is the intellectual effort that General James Amos will undertake as the new Commandant if he's confirmed by the Senate.

I won't preempt the work of General Amos and other smart people in trying to define the unique mission of the Marines going forward, but I would offer some observations. First, the contemporary debate about the mission of the Corps is not a new phenomenon. After World War II, some military leaders felt that Marine operations on land and in the skies had duplicated the functions of the Army and the Army Air Force. One Army general quipped, "You Marines are nothing but a bunch of beach runners anyway. What do you know about land warfare?" Ironic, given the concerns being expressed today.

In the wake of the post-war defense reorganization and the inter-service battles that went along with it, the Marines' mission was codified in federal statute, the only service to do so. In addition to a long list of maritime responsibilities was added -- and I quote -- "such other duties as the President may direct."

Since then, such duties as directed by the President have taken Marines to beaches, mountains and trenches in Korea and jungles and rice paddies in Vietnam, to the deserts of Kuwait in the first Gulf War and, most recently, to the urban alleys of Anbar Province and the dusty, rugged Helmand Province of Afghanistan.

And although many of these operations saw Marines being initially projected from sea, they soon turned into long, grinding ground engagements. As the service's new operating concept stated earlier this year, the Pacific campaign of World War II was the only period of history when the exclusive focus of the Marine Corps was on amphibious assault.

Yet fundamentally, the Marines do not want to be nor does America need, another land army nor do they want to be nor does America need a U.S. Navy police force, as President Truman once quipped.

The Marines' unique ability to project combat forces from the sea under uncertain circumstances, forces quickly able to protect and sustain themselves, is a capability that America has needed in this past decade and will require in the future. For example, it was a real strategic asset during the first Gulf War to have a flotilla of Marines waiting off Kuwait City forcing Saddam's army to keep one eye on the Saudi border and one eye on the coast.
And then, of course, it was a Marine armored formation in the desert, the second land army, if you will, that liberated Kuwait City.

Looking ahead, I do think it is proper to ask whether large-scale amphibious assault landings along the lines of Inchon are feasible though anti-ship missiles with long range and high accuracy may make it necessary to debark from ships 25 or 40 or 60 or more miles at sea. I, therefore, asked Secretary of the Navy, Ray Mabus, and the Marine Corps leadership to conduct a thorough force-structure review to determine what an expeditionary force and readiness should look like in the 21st century.

I directed them not to lose sight of the Marines' greatest strengths, a broad portfolio of capabilities and penchant for adapting that are needed to be successful in any campaign. The counterinsurgency skills the Marines developed during this past decade, combined with the agility and esprit honed over two centuries well positioned the Corps, in my view, to be at the tip of the spear in the future when the U.S. military is likely to confront a range of irregular and hybrid conflicts.

Ultimately, the maritime soul of the Marine Corps needs to be preserved notwithstanding the imperatives of today's wars. This institutional challenge is not unique to the Marines. All of the military services have been challenged to find the right balance between preserving what is unique and valuable in their traditions while, at the same time, making the changes needed to win the wars we are in and to prepare for likely future threats in the years and decades to come.

Achieving this balance is imperative because it is clear the United States will continue to face a diverse range of threats that will require a more and more flexible portfolio of military capabilities. We face a more complex future where all conflict will range across a broad spectrum of operations and lethality, where other modern militaries will use irregular or asymmetric tactics that target our traditional strengths and where terrorists or military groups may have sophisticated weapons.

Preparing for this uncertain future will be the key challenge for the entire Department of Defense as we move into a post-Iraq, post-Afghanistan era. A line I invoke time and again is that experience is the ability to recognize a mistake when you make it again. (Scattered laughter.) Four times in the past century, the United States has come to the end of a war and concluded that the nature of man and the world had changed for better and turned inward, unilaterally disarming and dismantling institutions important to our national security, and in the process, giving ourselves a peace dividend.

Four times we chose to forget history. Four times we have had to rebuild and rearm at huge cost in blood and treasure. After September 11th, the United States rearmed and, again, strengthened our intelligence capabilities. It will be critically important to sustain those capabilities in the future. It will be critically important not to make the same mistake for the fifth time.

Yet in the coming years, the pressure will undoubtedly be great to repeat that mistake and to reduce our spending on defense especially given the political and fiscal realities we face. The post-September 11th spigot of defense spending has been shut off, but I believe that we must have modest and sustainable growth in defense spending to allow us to maintain our capabilities, reset our fighting forces and invest adequately in modernization of future capabilities.

But to make the case for this growth at a time of economic and fiscal duress requires the Defense Department to make every dollar count, to fundamentally change the way we spend the taxpayers' dollars and the way we do business. It means shifting resources from bureaucracies and overhead to military combat capabilities needed by our combat forces today and in the future.

As part of this effort, I asked the entire Pentagon earlier this year to take a hard, unsparing look at how the Department is staffed, organized and operated. I concluded that our headquarters and support bureaucracies, military and civilian alike, have swelled to cumbersome and top-heavy proportions, grown over reliant on contractors, and grown accustomed to operating with little consideration for cost.

So starting in June, we embarked on a sustained, multifaceted effort to move America's defense institutions toward a more effective, efficient, and cost-conscious way of doing business.

As part of that broad effort, earlier this week I announced an initial set of major decisions designed to reduce duplication, overhead and excess in the Defense enterprise. I imposed new constraints on the size of staffs, senior positions and contractors. I also directed that we better take advantage of economies of scale in areas such as information technology. And I announced the elimination of several organizations, including a four-star command that performed duplicative functions or had outlived their original purpose.

While many of these decisions were difficult and will cause hardships for some affected employees, they are necessary to ensure that our fighting forces on air, land and sea have the resources to achieve a wider range of missions and prepare for future needs.

I want to give time for some questions, so I'll close with a final thought. At the beginning of the nuclear age, Albert Einstein remarked that everything has changed but our way of thinking. In his memoir, George Shultz cited that observation and remarked on how ways of thinking are so hard to change, which remains as true as ever.

The Marine Corps has been at the leading edge for over 200 years in adapting and responding to new technologies and new threats. Even as our country faces great challenges, the adaptability, initiative and improvisation, along with the raw courage that is displayed by United States Marines every day, give me the confidence that we can and we will prevail, as this country has in the past. And just as all our troops are doing their duty to ensure our country remains safe and strong, we in Washington must now do ours.

Thank you. (Applause.)

GEN. HOAR: Mr. Secretary, as Mike mentioned earlier, I'm Joe Hoar and I'm going to pop some of the questions for you, if I may. We have far more than you can possibly answer, so I'm going to try and organize them into groups.

Let's talk about Afghanistan first. There's obviously concern about whether or not we have enough forces in Afghanistan. And another question is the relationship with Pakistan. And as many of us believe, that really is the center of gravity there. And what are we doing to change that equation?

SEC. GATES: Well, first of all, the number of forces that have gone into Afghanistan represent the recommendation made by General McChrystal a year ago. There are about 40,000 new forces in Afghanistan. Thirty thousand of them are American, and almost 10,000 are from our partners, principally our NATO partners.

My British colleague, at the end of my first year on this job, referred to my efforts to get the Europeans to do more as megaphone diplomacy. (Laughter.) But the fact is that from about 17,000 troops in 2007, the Europeans and others are now up to almost 50,000 troops. And they are in the fight. A lot of the national caveats have gone away, and they are being very effective partners.

I have some fairly strong feelings about Pakistan, because I bear some personal responsibility for the United States turning its back on Afghanistan in 1989 and 1990 when I was Deputy National Security Advisor. When the Soviets left, we turned our attention away. We didn't do anything, leaving Pakistan with a huge problem. And then, shortly thereafter, with the implementation of the Pressler amendment, we had to cut off all of our military assistance to the Pakistanis because of their nuclear program.

So from the Pakistani standpoint, the United States, when our objective was completed -- that is, the ejection of the Soviet Union from Afghanistan -- we abandoned the area and left them holding the bag. So we have what Admiral Mullen, the Chairman of the Joint Chiefs, and I refer to as a significant trust deficit with Pakistan. (Laughter.) And they are worried about the possibility that we will leave again prematurely and leave them facing a difficult situation. And so they have hedged over the last decade, trying to be in a position to deal with whoever might come to power and keep power in Afghanistan.

I think we are reducing the trust deficit now. And most people don't realize that the Pakistanis now have 140,000 troops on their Northwestern Frontier, northwestern border areas. They are in the fight. They are taking significant casualties. And they are operating on their side of the border and increasingly cooperating with our operations on the Afghan side of the border. And they have gone into places like Swat and South Waziristan, making al-Qaeda flee those areas, which has given the -- raised the opportunity to kill more of the al-Qaeda.

So, I think that the Pakistanis have made huge progress. I think we have made progress with the Pakistanis. But what we need to do is to continue to affirm to the Pakistanis that we will be a reliable, strategic partner for the long term with them and that we are not going to walk away from Afghanistan and that when the fight is over in Afghanistan, we're still going to stay there and provide the kind of development aid and military training and so on that is needed, but that we are not going to turn our backs on that region again.

So is the situation perfect? Obviously not. But have we made significant progress? Have the Pakistanis made significant progress? Are they doing a lot to help us? The answer is yes.

Now, a caveat: The flooding in Pakistan today, in terms of the number of people it affects and the economic consequences, is actually several times worse than the earthquake in 2005. And how much this will impact Pakistan and its army, I think, remains to be seen. And that's one of the reasons why the President has asked us to lean very far forward in providing as much help as we possibly can.

GEN. HOAR: Mr. Secretary, a couple of years ago you had offered up some of the Defense budget in order to fund other parts of the government, most especially AID. Could you comment on our ability to have a more balanced approach towards our efforts in Afghanistan from the other agencies of government that are so important to us?

SEC. GATES: Well, first of all, just to set the record straight, I never offered up any of the Defense budget. (Laughter.) I just said they should have more. (Laughter.)

Actually, the Congress has, over the last several years, provided additional resources for State and Defense. But I would say that I think it's woefully inadequate. And let me just give you a couple of statistics that indicate the situation. If you took every Foreign Service Officer in the world and added them up, the number would not be enough to crew one aircraft carrier. There are about 6,000 FSOs. Condi Rice used to say we have more people in military bands than they have in the Foreign Service. She was not far wrong. (Laughter.)

When I left the government in 1993, the Agency for International Development had been a huge player in our success in the Cold War. When I left the government, it had about 16,000 employees, dedicated experts who were deployable, who were accustomed to working in insecure conditions in developing countries, and had all the specialties -- in agronomy, rule of law, education, you name it.

When I came back into government in 2006, at the end of 2006, AID had 3,000 employees and mainly was a contracting agency. This is a capability we have denied ourselves, and it is a huge opportunity for us. But these institutions need to be rebuilt and strengthened. Because of the size of the Defense Department, it is critically important that they receive additional resources so we can have rule of -- so we can have whole-of-government efforts to resolve a lot of the problems we're dealing with.

Now, the reality is they have really turned too. The number of civilians from the State Department and AID in Afghanistan has tripled since the first of the year, from about 300 to over a -- almost a thousand. So there's been a huge effort on the part of these agencies. But there just still is not enough critical mass there for them to play the role that they should.

And I will tell you, Congress is part of the problem. When I sent my budget to the Hill for roughly $550 billion, the Senate voted me $550 billion as the budget allocation. That's not what (I got out of the appropriators, but that's what the allocation was.

Hillary Clinton sent up a budget of about $50 billion, and they whacked four or five billion dollars out of it. So there has to be a change in attitude in the recognitions of the critical role that agencies like State and AID play for them to play the leading role that I think they need to play in most of these situations.

GEN. HOAR: Sir, you mentioned in that discussion the issue of contractors. I know that's an important part of the guidance with respect to reductions. Can you speak to the short term on how you would deal with some of the important aspects of what contractors do that we can manage as we cut back on the total number?

SEC. GATES: Well, I'm going to give the services and the various defense agencies a good deal of flexibility. I'm not telling them to cut 10 percent out of every contract. What I'm telling them is that "If your budget for contracting is 'x,' then, beginning in FY '11, you're going to get 'x' minus 10 percent. And you have to prioritize those contracts. Not all contracts are created equal, and some need to go by the way."

And so I think that the services and others will have the flexibility they need that they can fully fund contracts that are important and the contractors that are performing important work that we can't do, and at the same time begin to cut back on those that are redundant or where it's nice to have but not really critically important.

GEN. HOAR: You mentioned the issue of Pakistan and the difficulties that we have had historically. Is there some -- is there some value in extending how we deal with Afghanistan to a larger base? For example, China and Russia, perhaps Iran, India. India's penetration in Afghanistan is considerable, and this is part of the Pakistani problem. Is there a way to broaden our efforts there to the other neighbors with the hope that we can solve some of these long-lasting regional problems?

SEC. GATES: Actually, we're doing that. And that is one of the important roles, in my opinion, that Ambassador Holbrooke is playing. He has spent a lot of time on the road dealing with all of Afghanistan's neighbors, with the exception, obviously, of Iran. But the whole idea is to get others engaged.

And I'll tell you something that I wouldn't have believed three, four years ago. We have created an alternative supply network with Pakistan called the Northern Distribution Network, and we have now sent something on the order of 20,000 containers across Russia through Central Asia to Afghanistan.

The Russians have been very cooperative in this respect. So have the Central Asian nations. About 50 percent of the sustainment supplies that are going into Afghanistan are now going across this Northern Distribution Network. So other countries have been cooperating with us, have been helping us, even if they don't have troops in Afghanistan. But clearly we need to keep them engaged.

GEN. HOAR: With all of the attention that we have paid to Iraq and Afghanistan in the last few years, I'm sure our friends in the Navy are concerned about our ability to meet peer competitors in other places, notably the Western Pacific. Are you comfortable with where the naval forces are? And while you're thinking about naval forces, you might talk a little bit about amphibious shipping too.

SEC. GATES: Well, first of all, I am concerned that we don't have enough ships. I am concerned that there is not enough money in the shipbuilding accounts. And we're not even to the point where we're beginning to think about replacing the Ohio class ballistic missile submarines that will come toward the end of this decade. We're working hard to get the cost of that down, but there -- even if we're really successful, those are still going to be about five billion dollars apiece, so -- which is down from the original estimates of over seven billion, so we're making headway. (Laughter.)

But if -- one of the things in this -- in this budget exercise that we have under way -- there are -- there are two aspects of it that I think are important. One is to incentivize the services to find savings. I am telling them that whatever they -- whatever savings they find in overhead, redundancy, weak programs that they're prepared to take action on, they can keep that money to reinvest in their highest-priority investments for the future -- modernization and for future investments. I suspect in the Navy that will probably be -- shipbuilding will be pretty close to the top of that list.

Now, for the defense agencies, the combatant commands and the Office of the Secretary of Defense, they don't get that deal. All the savings they find, I'm taking -- (laughter) -- and going to give to the services to invest in future -- in force structure, modernization and future investments, and taking care of our men and women in uniform.

So the idea here is to use this entire enterprise to reenergize some funding streams that, frankly, just haven't been -- haven't been big enough. And I think the Navy is headed in the right direction in this respect. And these savings that we anticipate I think are going to give us some help, both from inside the Navy and from the rest of the Defense Department outside the other services.

We clearly need to have amphibious capability. The question that all of us need to think about is how much. These big decks -- the Peleliu, which is off of Pakistan; the Kearsarge, that is going to relieve it -- these are enormously versatile ships that give us huge options, whether it's humanitarian assistance and disaster relief, or just platforms for special forces, or a number of other activities, including projecting both Ospreys and helicopters across the water into countries. So I think there's a lot of -- and we have, I think, a pretty good budgetary allocation for these amphibious ships, but I think we do have to address how many we need and how many we -- how many more we should buy and how many we should sustain in the fleet.

GEN. HOAR: Sir, while we're in the Western Pacific, would you talk for a moment about the threats of North Korea and how we might work -- not only with South Korea, but perhaps with China as well, to reduce that threat?

SEC GATES: Well, I will -- I will say that I think that the administration has bent every effort to try and work with China in dealing with North Korea. And the problem is, I think one of the worries -- one of the main worries I have about North Korea is that they appear to be starting a succession process, and I have a sneaking suspicion that Kim Jong-il's son, who wants to take over, has to -- has to earn his stripes with the North Korean military. And my worry is that that's behind a provocation like the sinking of the Cheonan. And so I think we're very concerned that this may not be the only provocation from the North Koreans.

And what worries the Chinese -- and I think justifiably so, but to the exclusion of everything else -- is the prospect of instability in North Korea, of the collapse of the regime, which would send millions of North Korean refugees across their border. And so I think that's one of the reasons why they are unwilling to put much pressure on that regime, because maybe they, even more than we -- believe it's very frail.

But the fact is that North Korea continues to try and smuggle missiles and weapons to others around the world -- Burma, Iran, Hezbollah, Hamas. They continue with their development of long-range missiles and their nuclear program. This is -- this is a very, very tough national security problem.

GEN. HOAR: Speaking of difficult security problems, would you speak a little bit to the development of a nuclear capability in Iran and where we are with respect to that problem and the degree to which that the government of Israel and the United States are in sync with respect to how to respond, if at all?

SEC. GATES: Well, first I would say that we are working very closely with the Israelis. We have very intense intelligence exchanges with them. We've done a lot to help them develop their defenses against missiles, principally, obviously, looking at Iran. We've put a specialized radar in Israel. We have Aegis-equipped ships in the Eastern Mediterranean for early warning. We have helped them with the development of their Iron Dome system to try and go after shorter-range missiles.

So I would say I think that our security cooperation with Israel is probably as intense in concrete terms as it has been in a long time.

I would say that in my career that Iran is one of the most frustrating and challenging national security problems the United States has faced. If they acquire nuclear weapons, there will almost certainly be proliferation, a race for proliferation in the region, with several other countries going -- determined to get nuclear weapons, if Iran has them. To have a proliferation problem in the most volatile part of the world cannot be a good development.

On the other hand -- we've talked about this before -- I think we've seen vividly enough in Iraq that every war is unpredictable, and it has unintended consequences and is more difficult than people -- may expect. And I think a military attack on Iran would have enormous consequences in a variety of ways. We have to keep that option open. We have to make sure that the president has every available option in these circumstances.

I will say that all the evidence is -- particularly this last round of sanctions, is really beginning to bite the Iranians. And they hate to be isolated, and they are isolated. They hate these resolutions. You may not think the U.N. resolutions are strong enough, but the fact that the entire Security Council votes -- and particularly Russia and China vote against them -- has real impact. And the Security Council resolution provides a legal platform beyond which individual countries can then take dramatically more severe steps against Iran, and that's happening now.

So the question is, how do you -- how do you push the timeline on Iran forward to give them time to make them realize the costs of their nuclear program and of their international isolation in a way that they are willing to agree to a peaceful nuclear program with appropriate safeguards, with the IAEA and other nations, so that we know they're not building nuclear weapons?

The only long-term solution to this challenge is for the Iranian government itself to decide that having nuclear weapons diminishes their security rather than enhances it. And so we're working with neighbors in the region, in terms of building their missile defense capabilities and their military capabilities.

We are continuing the sanctions. We are continuing the political pressures. We're looking at, how can we -- what would it take for us to say yes? What would they have to do in terms of this program, for us to be confident enough that we could have a negotiated or a diplomatic solution to this problem?

But we are ready with all options. But this was a very, very tough problem for the Bush administration and an equally tough problem for the Obama administration.

GEN. HOAR: Staying on that subject, sir, a few years ago, Hamad bin Jassim, at that time the foreign minister of the state of Qatar, traveled to Tehran to explain to the Iranians that in the event of an attack on Iran that Qatar would not be a participant in supporting it.

And his interlocutors indicated that regardless -- if there were to be an attack, that because the Iranians weren't capable of reaching U.S. targets, that targets up and down the Persian Gulf would be the ones that they would strike.

You mentioned that there's been greater movement towards particularly Patriots in Kuwait. And it's my understanding that they're also in Bahrain and in Saudi Arabia and UAE.
Are we prepared to sell military equipment to the GCC countries that will assist them in protecting their own, particularly their fixed installations?

Beyond that in the region, can you speak a little bit to the problems that we face in Yemen and in Somalia with al-Qaeda and related kinds of activities?

SEC. GATES: Well, one of -- one of the problems we must face is that while al-Qaeda in North Waziristan and in the Federally Administered Territories in Pakistan remains a problem, remains a source of inspiration and training for terrorists, and remains if you will the ideological heartland of this -- of al-Qaeda, the problem has -- the challenge they pose has metastasized.

And so we find groups like al-Qaeda of the Arabian Peninsula, al-Qaeda of the Islamic Maghreb. We see some activity in Sudan. We see al-Shabab in Somalia trying to establish a relationship with al-Qaeda, and al-Qaeda telling them -- the leaders of al-Qaeda telling them, don't focus so much on trying to take over your own country, go after the United States, go after the West; this is where -- this is -- you need to get those guys out of the region and then you can do what you want.

So it has become a more difficult problem. The difference of course is that in Yemen, we have a country and a leader that is willing to cooperate with us and work with us in this. And so we're trying to build their capabilities.

Somalia is a very tough problem, because it's difficult to get in there, it's difficult to identify the training camps, it's difficult to see exactly what these guys are doing. And what we may be seeing is more people from Somalia, trained terrorists, going to Yemen or going outside of Somalia to try and get to the U.S.

So this problem is not going away. This challenge of extremist terrorism is more dispersed than it was before 2001. But it is still a mortal threat to us.

GEN. HOAR: Sir, we have time for one more question. We have several questions about Iraq. Perhaps I could summarize them by saying, most everybody seems to be interested what that country is going to look like after the withdrawal of American combat troops. And if you could share with us, how do you see that unfolding?

SEC. GATES: Well, I think -- as the White House announced yesterday, we met on this a couple of days ago with the President and General Odierno when Ambassador Hill reported on the situation in Iraq. And here again the narrative hasn't quite gotten through. General Odierno reported, among other things, that the violence in Iraq has been at the lowest level over the past two weeks as it has been since the -- since we went in…in 2003.

So there are some isolated groups that continue to try and suggest that they play an important part. A lot of these bombings that are taking place are by the remnants of al Qaeda in Iraq. But the fact is, these guys are doing politics.

I was somewhat heartened in terms of the time it's taking them to put together a government when I learned that it was going to take the Dutch about four and a half months to put together a coalition government. (Soft laughter.) But they're not shooting at each other; they're negotiating. And to tell you the truth, we expected it to take several months for them to put a government together.

But consider this. Iraq in 10 years could be producing as much oil as Saudi Arabia and could be a very rich country. And if it is able to sustain the democracy that it has today, I think it will change the entire equation in the Middle East. That's the -- that's the optimistic scenario. There are all kinds of more pessimistic scenarios.

But I think Iraq's future is open now. And it's a little bit like what happened in the Soviet Union in 1991. No one was sure what would come later, but for the first time in their history the Russian people had a choice and the future was open to them. I think the same thing is true of Iraq today.

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